Call to end pensions confusion

Thursday 24 June 2004 11:01 BST

A WORKING group was launched today to look at practical ways of clearing away the confusion surrounding State pensions.

The National Association of Pension Funds is calling on the Government to replace the current complex system, which it claims makes it difficult for people to plan for retirement, with a Citizen's Pension.

This would be a simple, flat rate pension, which would be paid to anyone who satisfied a minimum residency test.

The NAPF has set up a working group to look at a number of issues such as how the current two State pensions could be merged into one Citizen's Pensions, what the residency test would be and how much people should receive through the pension.

It will also consider whether means-tested benefits should be retained and look at a possible time scale for introducing the changes.

The group is made up of people from a number of pension and consumer bodies, including the NAPF, National Pensioners' Convention and the National Consumer Council, as well as firms such as Legal & General and PricewaterhouseCoopers.

Christine Farnish, chief executive of the NAPF, said: 'Over the years, the UK's pension system has become ever more complex and confusing. Most people are baffled by it.

'If people don't understand the State pension system, the most complicated in the western world, how can they be expected to make meaningful plans for retirement?'

She said the group would now look at a practical and affordable transition path which would enable a Citizen's Pension to be introduced.

A new means-tested Pension Credit was introduced in October promising a minimum income of £102.10 a week for everyone over 60, with a couple getting at least £155.80. And for the first time those aged at least 65 who have extra savings or modest occupational pensions also received State help.

An estimated five million pensioners qualify for the benefit, double the number who received the old Minimum Income Guarantee, which was phased out. However, figures in January revealed only half of those entitled were claiming the benefit.